Indiana's agricultural outlook for 2014.

• Author: Alexander, Corinne

The outlook for Indiana agriculture in 2014 predicts more moderate crop incomes and a return to profitability for the livestock sector. As of November 2013, with the more normal weather and a return to more normal yields, crop prices have fallen significantly: corn prices have fallen 30 percent, wheat prices have fallen 25 percent and soybean prices have fallen 7 percent. In 2014, with more typical weather and crop yields, prices for corn, wheat, soybeans and hay could decline further as U.S. inventories of these commodities will continue to rebuild. On a brighter note, these lower feed costs are welcome relief for livestock producers who suffered massive losses from the 2012 drought-induced high feed prices.

The pork industry has returned to profitability with producers earning $20 per head in late 2013 and anticipated returns of $28 per head in the first half of 2014. The primary driver of profitability in the hog industry is lower feed prices. As a result, hog producers are currently expanding their herds which will result in increased supplies of pork by the summer of 2014. As pork supplies increase next summer, hog prices will moderate and profit margins will narrow in late 2014.

The dairy industry is beginning to recover from prolonged losses due to extremely high drought-induced feed costs for grains and forages. Milk prices are forecast to be steady in 2014, supported by strong exports. One concern is that there are large inventories of butter and cheese, which could put downward pressure on dairy prices if exports slow down. Given the lack of USDA data due to sequestration and the partial government shutdown, there was no information at the time of this writing about the size of the U.S. dairy cow herd, which increases uncertainty about dairy supplies.

Over the last six years, the beef sector has adjusted to prolonged drought conditions and higher feed costs by reducing the breeding herd. The beef cow herd numbers are at their lowest levels since 1950. As a result, per capita domestic beef availability in 2014 will be 5 percent lower than in 2013 and 17 percent lower relative to 2007. Even though feed costs have moderated, the beef herd expansion will be very slow in 2014 because of continued drought conditions in the Southern Plains and Western regions. Indiana beef producers who have access to good forage conditions are well positioned to be profitable in 2014 and beyond.

We expect the row crop sector to have overall favorable...